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Govt aims to up subsidy, hike power rates as global energy prices surge
Finance Minister Sri Mulyani Indrawati has proposed a nearly Rp 291 trillion (US$19.83 billion) increase in subsidies and compensation as the government seeks to keep fuel and electricity affordable despite a global energy price surge.
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Finance Minister Sri Mulyani Indrawati (right) leaves the room after the closing of the G20 finance ministers and central bank governors meeting in Jakarta on Feb. 18. (AFP/Risyal Hidayat)
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inance Minister Sri Mulyani Indrawati has proposed to the House of Representatives a massive increase in subsidies and compensation as the government seeks to keep fuel and electricity cheap despite a global energy price surge.
The move, announced on Thursday afternoon, would raise budget allocations for energy subsidies and compensation by nearly Rp 291 trillion (US$19.83 billion) to Rp 443 trillion, far above the figure stated in the budget plan for this year.
The government has all but ruled out the option of raising fuel prices for now.
According to the proposal, the compensation would consume Rp 234.6 trillion of the energy budget, a tenfold increase from the initially planned Rp 18.5 trillion for this year. Rp 208.9 trillion would go to subsidies, raising that budget allocation by more than half of the initially planned amount.
The compensation goes to state-owned energy firms Pertamina and PLN.
The proposed increase in subsidies and compensation for this year, in addition to Rp 108 trillion in outstanding compensation obligations from last year, brings the additional energy spending need for the 2022 budget to Rp 400 trillion.
“There are only two options. If we do not raise [subsidies], then fuel and electricity prices will rise. There is no in-between. Therefore, our expenditure in the state budget will be greater,” Sri Mulyani told lawmakers during a meeting with the House's budget committee.
